Normally, it is best to file the Free Application for Federal Student Aid (FAFSA) as soon as possible on or after the October 1 start date. But, there are a few reasons why students sometimes wait to file the FAFSA, other than procrastination.
- Applying for admission to a need-sensitive college. Some students will delay applying for financial aid when applying for admission to a need-sensitive college because they worry that applying for financial aid will affect their admissions chances. However, some colleges will deny institutional grants to these students in the current and subsequent years, unless the student can show that their financial circumstances have changed. Colleges with need-sensitive admissions do not want families to try to manipulate the system.
- Financial circumstances have changed. The family might not have needed financial aid originally, but then job loss, pay cuts or a drop in asset value affected their ability to pay for college. As soon as they become aware of the change in financial circumstances, they should apply for financial aid. It is usually better to file the FAFSA initially and later ask for a financial aid appeal, since families often misjudge their need and eligibility for financial aid.
- Waiting for a change in financial circumstances. Assets are reported as of the date the FAFSA is filed, so timing matters. If the family anticipates a future change in assets, they might want to wait to file the FAFSA. For example, if a family sold their home, the sale proceeds must be reported as an asset until the family commits to purchasing a new home and the money is deposited in an escrow account. Other examples include moving the student’s UGMA or UTMA account into a custodial 529 plan, transferring reportable assets into a Roth IRA and waiting for a stock market transaction to close.
- A change in the student’s marital status. If the student is getting married, it will change their dependency status from dependent to independent, affecting their eligibility for financial aid. But, applicants cannot anticipate a future change in marital status. Marital status must be reported as of the date the FAFSA is filed.
In limited circumstances the college financial aid administrator can allow a change in the student’s marital status, but only if the change is necessary to address an inequity or to more accurately reflect the student’s ability to pay for college. The college financial aid administrator is not required to allow a change in the student’s marital status.
- A change in the parent’s marital status. If a parent is getting divorced or separated, it can affect the amount of income and assets reported on the FAFSA. The income and assets of both parents must be reported on the FAFSA if they are married as of the date the FAFSA is filed. Once they are divorced or separated, the income and assets of the ex-spouse are not reported on the FAFSA.